At the start of Year 1, DEF Inc. has a UCC balance of $100. During Year 1, the company acquired assets in the amount of $50 and disposed of assets with an undepreciated value of $25 for $20. The pool qualifies as Class 8 assets (20% CCA). The remaining balance in the asset pool at the end of Year 1 as a result of the above information would be:

Question

Quizplus · Accepted Answer

The calculation for the remaining balance in the asset pool at the end of Year 1 is as follows: Start with the initial UCC balance of $100, add acquisitions of $50, subtract disposals of $25, and then apply the CCA rate of 20% on the remaining balance before CCA ($125 - $25 = $100). The CCA deduction is $20 (20% of $100), resulting in a final UCC balance of $100 - $20 = $80. However, since the disposal proceeds ($20) are less than the undepreciated value of the disposed assets ($25), the final balance is adjusted back up by the difference ($5), leading to a final balance of $80 + $5 = $85. This correction is made to reflect an error in the calculation process, adhering to the correct method for calculating the remaining balance in the asset pool, which involves adjusting for the shortfall in disposal proceeds compared to the undepreciated value of the disposed assets.

At the Start of Year 1, DEF Inc